Welch 2016 Private Enterprise Accounting Updates

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  • O C T O B E R 6 , 2 0 1 6

    Private EnterpriseWelch LLP Presents:

    Accounting UpdatesAudit Tax Accounting Consulting

  • AGENDA

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    NETWORKING & SNACKS

    HST/ INPUT TAX CREDITS IN HOLDING COMPANIES GARTH STEELE

    IFRS/ASPE SHAWN KELSO

    INCOME TAX UPDATE: WHAT YOU NEED TO KNOWDON SCOTT

    CRA TIPS: WHAT THEYRE LOOKING FOR GARY DONELL

    AUDIENCE Q&A

    BUSINESS INCENTIVES UPDATE JOSHUA SMITH

    AUDIENCE Q&A

    BREAK

    TRANSACTION INDUSTRY UPDATES STEPHAN MAY

  • SPEAKER BIOS

    GARTH STEELE, CPA, CA AUDIT & INDIRECT TAX PARTNER

    With With over 20 years of experience as a Partner at Welch, Garth has an exhausve list of Not-for-Profit audit experience. In addion to auding NPOs, Garths forte is Commodity Taxes (GST, HST, PST) and Payroll Taxes (CPP, EI, EHT, WCB). For the past 20 years, Garth has been a tutorial leader and lecturer for the CPA Canada In-Depth GST Course, as well as an instructor for CPA Ontarios annual Professional Development program.

    DON SCOTT, FCPA, FCADIRECTOR OF TAX SERVICES & TAX PARTNER

    Don is nDon is na onally recognized for his extensive knowledge in the area of Personal and Corporate Tax Planning. He regularly contributes content to keep Welch LLPs clients up to date on the latest tax issues.Don authors the annual Income Tax Update course, which is taught na onally through the CPA professional development program and teaches various specialized tax courses for the CPA Canada and CPA Ontario. He is also a meHe is also a mentor to students within the firm that are working towards their CPA designa on.

    SHAWN KELSO, CPA, CADIRECTOR OF PROFESSIONAL STANDARDS & PARTNER

    ShShawn began working with Welch LLP in 1993, serving clients in the private and not-for-profit sector. In 2005, Shawn was appointed Director of Professional Standards and is responsi-ble for the compliance with Quality Assurance policy in all 12 of Welchs offices. He is also responsible for ensuring all Quality Control direcves, as set by the Canadian Instute of Chartered Accountants (CICA), are upheld on audit files as wwell as recommending and enforcing Welchs internal quality assurance policies and procedures.

    welchllp.com

  • SPEAKER BIOS

    GARY DONELLINDEPENDENT CONTRACTOR & TAX CONSULTANT

    STEPHAN MAY, MBA | MANAGING DIRECTORWELCHGROUP CONSULTING

    SStephan is the Managing Director of WelchGroup Consulng. He brings years of experience in M&A, debt capital, private equity, advisory and restructuring services. Stephan works with compa-nies to maximize their value and ensure a smooth transion process, whether through buying or selling your company, financ-ing or restructuring. Stephan is a regular guest speaker at Telfer School of Business. In addion, he is currently the Chair of an iinterna onal Corporate Finance Group. In 2015, Stephan was a recipient of the Top 40 under 40 award.

    JOSHUA SMITH, CPA, CA | BUSINESS INCENTIVES LEADER

    Joshua gJoshua graduated with a Bachelor of Commerce from the Univer-sity of O awa in 2002 and began working with Welch LLP in 2006. He obtained his CA designa on in 2008. Joshua has worked on a number of government compliance audits, as well as audits for private sector and not-for-profit clients.Since 2007, Joshua has focused on tax compliance and planning for personal, business and estate clients. Joshua is also responsible for SR&ED and other business incebusiness incen ve planning.

    Gary began with CRA in 1985 a er working in the private sector for eleven years and has stayed in various roles for nearly thirty years. He regularly consults with numerous CRA auditors on a variety of domesc and interna onal issues. In his roles with CRA, Gary has parcipated as a guest speaker in CRA sponsored tax events for some of Canada's largest companies, provided a special tax event to the Department of Jusce and the Depart-mement of Finance policy secon, and has been the CRA guest speaker for the last decade in the advanced tax program. Finally, he has acted as a consultant and advisor to 2 authors on their tax based textbooks, and currently heads the Tax 2 program at Athabasca University.

    welchllp.com

  • PRIVATE ENTERPRISE ACCOUNTING UPDATES

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    HST/Input Tax Credits in Holding Companies

    Garth Steele, CPA, CA Partner gsteele@welchllp.com

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    Registration for HST required if carrying on a Commercial Activity

    The holding of shares or debt in a subsidiary is not a CA

    Voluntary registration may be permitted

    HST + Holding Companies

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    S 186(3) Excise Tax Act

    All or substantially all of the property of the subsidiary is used exclusively in CAs

    Subsidiary is related to parent

    The shares held by the parent and the debt held by the parent in the subsidiary is deemed to have been acquired by the parent for use exclusively in the course of its CAs

    Deeming Rule

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    If parent company is registered for GST/HST

    ITCs are available in respect of expenditures incurred in relation to the shares or debt of the related company

    Impact

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    Subsidiaries engaged exclusively in commercial activities

    No ITC - Expense relates to annual meeting of parent company - Expense relates to issuing shares or debt in parent company

    ITC - Expense is a legal fee related to acquiring shares in subsidiary

    Examples

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    Shawn Kelso, CPA, CA Partner skelso@welchllp.com

    IRFS/ASPE

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    Purpose To clarify application of cost method to strategic investments

    Key features Measure at FV of consideration transferred at acquisition date

    (includes contingent consideration) Bargain purchase gain would not be recognized Previously held investment would not be re-measured Acquisition costs would be expensed

    Amendments to ASPE 1591 (Subsidiaries) + 3051 (Investments)

    Transition Effective for Jan 1,2018 Prospective (to new acquisitions)

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    Placement of significant accounting policy note

    Change in accounting policy for current period no longer required under 1506

    Amended 1521 (Balance Sheet) re: required disclosure of assets under capital lease. Consistent with section 3065 LEASES.

    Removal of disclosure requirement re: impaired operating leases receivable (replaced by disclosure of allowancesimilar to trade receivables)

    2017 Annual Improvements

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    Purpose Original purpose was to eliminate exception for redeemable preferred

    shares

    Developments Significant concerns expressed from practitioners/preparers Implementation postponed (effective date no earlier than Jan 1, 2018) Discussions ongoing (viability of classification exemption)

    Project Redeemable Preferred Shares

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    More guidance in certain areas

    Confusion around application of standard to RPTs

    Questioned the value of certain disclosures

    Post Implementation Review: ASPE S. 3856 Financial Instruments

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    Assets in Scope Unharvested crops Agriculture produce Animals held for sale Bearer plants/animals

    ASPE Discussion Paper on Agriculture

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    Measurement Alternatives Cost Current value Current value when conditions met Insured value

    ASPE Discussion Paper on Agriculture

  • 14 ASPE Discussion Paper on Agriculture

    Asset Preliminary View

    Unharvested crops Cost

    Agriculture produce Current value when conditions met (cost if not met)

    Animals held for sale Current value when conditions met (cost if not met)

    Bearer plants/animals Cost

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    Purpose Address concerns re: off balance sheet financing

    Implications Lessees will be required to recognize most leases on balance sheets

    Right of use assets Obligations to make lease payments

    While have impact on numerous financial metrics for entities with material leases Essentially no change to lessor accounting

    New IFRS Standard for Leases (IFRS 16)

    Effective Date Effective from Jan 1, 2019 Early adoption requires IFRS 15 to be adopted as well*

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    Definition of a Lease Identified asset Control over asset Separating lease and non-lease components (e.g. service components)

    Important Elements of IFRS 16

    Transition Options Full retrospective option (FY Dec 31, 2018 and Dec 31, 2019) Modified retrospective approach (FY 2019)

    Cumulative effective = adjust opening R/E at Jan 1, 2019)

    Exceptions to general application Short term leases (< 1year) Low value leases (< $5K)

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    Purpose Provide more guidance on application or revenue recognition principles

    IFRS 15

    Transition Effective from Jan 1, 2018

    New 5 Step Process ID Contract Id separate performance obligations Determine transaction price Recognize revenue when performance obligations met

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    Purpose Enhance the representational faithfulness of standard and improve the

    execution of the standard

    Financial Instruments

    Transition Effective date is Jan 1, 2018 Transition relief

    Key Elements New financial instruments classification/measurement model New impairment criteria New hedging criteria

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    Amortized Cost

    FVOCI

    FVTPL

    IFRS 9 Principle Measurement Categories

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    IFRS 9 Asset Classification FVOCI (equity instruments) FVTPL (equity instruments) Amortized c